Share Purchase Agreements in Kenya: Essential Clauses and Legal Protection

Share Purchase Agreements in Kenya: Essential Clauses and Legal Protection

A Share Purchase Agreement (SPA) is the cornerstone of any sale or acquisition of company shares in Kenya. Whether you’re an investor buying into a Kenyan business or a founder exiting, the SPA sets out each party’s rights, duties, and protections.

In Kenya, poorly drafted SPAs can expose businesses to disputes, tax penalties, or major financial losses. Working with experienced lawyers like WKA Advocates ensures your SPA aligns with local laws and commercial realities. This guide explains what an SPA is, the essential clauses to include, and how to protect your interests.

What is a Share Purchase Agreement?

A Share Purchase Agreement is a legally binding contract between a seller and a buyer detailing how shares will be transferred.

Typically, it covers:

• Number and type of shares sold

• Purchase price and payment terms

• Conditions to complete the deal

• Warranties, indemnities, and post-completion obligations

In Kenya, SPAs must comply with:

• Companies Act, 2015

• Law of Contract Act

• Income Tax Act (for tax treatment)

• Competition Act, 2010, if the transaction meets merger thresholds

Why an SPA Matters

A well‑drafted SPA:

• Defines obligations clearly, reducing uncertainty

• Minimises risk of post‑transaction disputes

• Ensures compliance with Kenyan law, tax, and regulatory rules

• Supports due diligence and risk assessment

• Protects the buyer’s payment terms and the seller’s liability limits

At WKA Advocates, we craft SPAs to match each client’s commercial and legal priorities.

Key Clauses in a Kenyan Share Purchase Agreement

1. Parties

Clearly identify buyer(s), seller(s), and the company whose shares are being transferred.
We confirm each party has the legal authority to sign.

2. Sale and Purchase of Shares

Details include:

• Number and class of shares (e.g., ordinary or preference)

• Confirmation shares are fully paid and free from encumbrances

WKA Advocates ensures this matches the company’s share register and Articles of Association.

3. Purchase Price and Payment Terms

Specifies:

• Total price

• Payment method (e.g., cash, escrow, staggered instalments)

• Price adjustments based on final accounts or working capital

We negotiate fair terms to protect both sides.

4. Conditions Precedent

Lists events that must occur before closing, such as:

• CAK (Competition Authority of Kenya) approval

• Satisfactory legal and financial due diligence

• Shareholder or board approvals

We track and manage these conditions to avoid delays.

5. Warranties and Representations

Assurances from the seller on:

• Legal ownership and authority to sell

• No pending litigation or undisclosed liabilities

• Accuracy of financial statements and compliance with tax laws

WKA Advocates drafts warranties to reduce buyer risk.

6. Indemnities

Sets out compensation if losses arise from breaches or undisclosed risks.

We balance buyer protection with reasonable seller liability limits.

7. Confidentiality and Non‑Compete

Protects the buyer’s interests by preventing the seller from:

• Revealing sensitive business information

• Starting a competing business within an agreed period or area

We draft these clauses in line with Kenyan law.

8. Completion and Closing

Describes:

• Completion date and place

• Documents to exchange (e.g., share certificates, resolutions)

• Updating the eCitizen business registry

We handle filings to ensure seamless closing.

9. Governing Law & Dispute Resolution

Specifies Kenyan law applies and sets out:

• Preferred method: arbitration, mediation, or litigation

• Venue and rules for disputes

10. Miscellaneous Provisions

Includes:

• Entire agreement clause

• Notices and communication methods

• Rules on amendments or assignment

Often overlooked, but vital to avoid loopholes.

Legal Protections for Buyers and Sellers

For buyers:

• Robust warranties and indemnities

• Escrow arrangements

• Rights to withdraw if conditions aren’t met

• Thorough due diligence access

For sellers:

• Caps on liability and claim time limits

• Materiality thresholds

• Full disclosure to reduce future claims

• Clear payment guarantees

At WKA Advocates, we customise SPAs to protect both parties while keeping deals commercially attractive.

How WKA Advocates Supports You

• Drafting & negotiating SPAs under Kenyan law

• Legal and regulatory due diligence

• Advice on tax and stamp duty

• Liaising with Business Registration Service (BRS)

• Share transfer filings and registry updates

• Post-completion support and dispute resolution

From founder exits to cross-border acquisitions, we help clients close secure, compliant deals.

FAQs: Share Purchase Agreements in Kenya

1. Is an SPA mandatory?
Yes. It’s the main legal contract for selling company shares under the Companies Act, 2015.

2. Can I draft it without a lawyer?
Not advisable. An SPA must address legal, tax, and compliance risks. Mistakes can cost more than legal fees.

3. Is stamp duty payable?
Yes—1% of the higher of purchase price or nominal value.

4. Difference between SPA & Shareholders’ Agreement?
SPA covers the share sale itself; Shareholders’ Agreement covers ongoing shareholder rights.

5. What if the seller provided false info?
Buyer can claim compensation under warranty and indemnity clauses.

6. Can foreign investors sign an SPA?
Yes, but extra regulatory steps (e.g., CAK approval, sector caps) may apply.

7. Can an SPA be cancelled?
Only if conditions precedent aren’t met, there’s fraud, or the agreement includes a termination clause.

Share Purchase Agreements in Kenya

A Share Purchase Agreement in Kenya isn’t just paperwork—it safeguards your investment, ensures legal compliance, and builds trust.

WKA Advocates combines commercial insight and legal expertise to draft SPAs that protect clients in every transaction.